How Lobby Works in China?

Dongya Huang from Sun Yat-sen University reveals the real relationship between enterprises and the state

The relationship between states and enterprises has always been a hot topic in Chinese studies overseas. As someone who has worked in a government relations position for a Chinese Internet platform, I find this subject particularly intriguing and relevant to my own interests. Hope it’s this summary is helpful. Press the subscribe button if you like it.

Recently, a well-known Chinese podcast called "Leftright" released its latest episode, "Lobbying Within the System," featuring Professor Huang Dongya. In this episode, they discuss the power dynamics between various enterprises and the state, including how private and foreign companies manage to influence state decisions. Although the podcast is in Chinese, I highly recommend it to anyone who can understand the language. For those who can't, don't worry – just follow along with me!

Huang Dongya is an Associate Professor in the School of Government at Sun Yat-sen University, located in Guangzhou, China. She received her PhD from The Chinese University of Hong Kong. With a deep-seated expertise in comparative politics and Chinese politics, Professor Huang has significantly contributed to our understanding of the intricate relationship between the Chinese government and enterprises.

In this episode, she introduced her new book, Lobbying within the System. In the West, interest group politics involves lobbying and competition to influence the political system. In China, we view lobbying as pursuing special interests, not public interests. Despite this, we observe changes in China's political development, with lobbying concepts emerging within the system, though still distinct from the West.

She believes the Chinese government has three goals: political, economic, and social. All decisions are made at the base of balancing these goals. When economic goals are prioritized, interests align more closely between the state and enterprises. Political goals have been relatively stable, but social goals have fluctuated in recent years. (Regulation on after-school tutoring institutions was designed to lower the burden for children, which is part of the state’s social goals, and it is the same as regulation on the gaming industry in recent years.)

Different levels of government and departments have varying goals, which also affect government-business relations. We often view the state as a single actor with a unified will, but in reality, it doesn't have one. Local governments, motivated by economic development, might prioritize economic objectives, while central government goals might differ. These internal dynamics and the balance of goals influence government-business relations.

In her research, there are three dimensions of government-business relations: Power Fragmentation, Policy Dependence, Policy Monitoring, and Policy Dependence.

Power Fragmentation

Different levels of government and departments have varying goals, which affect government-business relations. We often view the state as a single actor with a unified will, but in reality, it doesn't have one. Local governments, motivated by economic development, might prioritize economic objectives, while central government goals might differ. These internal dynamics and the balance of goals influence government-business relations.

Policy Dependence

Large-scale enterprises often have greater policy influence due to their economic contributions. (Like Tencent in Guangdong and Tesla in Shanghai) However, influence is not solely based on size; alignment with local government goals also matters. For example, emerging industries like new energy vehicles might receive more support from local governments due to their alignment with development goals.

Policy Monitoring

Regulatory enforcement varies. For instance, pollution issues might not always be addressed due to various factors, including local government priorities and the burden of enforcement. Whether the central government told you to regulate. These nuances affect how enterprises influence policy and government response. This also gives enterprises room to negotiate.

How Private Companies Lobby?

It's important to recognize that the state's goals are not static; they are subject to negotiation and lobbying by various stakeholders, including enterprises. Polluting industries, such as printing and dyeing companies, may argue that they can adopt measures to mitigate pollution and highlight their role in providing employment to persuade the government to adjust its environmental protection goals. This negotiation process is an integral part of the dynamic between the state and businesses.

The transmission of the state's goals within the government hierarchy adds another layer of complexity. Local governments often receive diverse and sometimes conflicting goals from higher-level authorities, such as balancing environmental protection with economic development. The attention and priorities of the leadership at each level can influence which goals are emphasized and how they are implemented at the grassroots level. For example, if the central government prioritizes economic growth, local governments may place a greater emphasis on supporting businesses and boosting GDP.

For small private enterprises, entrepreneurs often rely on their personal connections and voice their concerns directly to officials. In contrast, large corporations typically have dedicated public relations and government affairs departments to navigate the complex web of government relations and lobby for their interests.

Huang stressed that businesses must be aware of the social and political implications of their actions. Labor relations, for instance, are not merely an economic issue but a social one, given the socialist roots of many countries. Mishandling labor issues can quickly escalate into a major social concern, prompting the state and regulatory authorities to adjust their goals and priorities.

How Foreign Companies Lobby in China

Foreign companies have a significant presence and influence in China. When it comes to policy lobbying, foreign companies have a distinct advantage over Chinese private enterprises. In the past, Chinese private enterprises were small-scale and scattered, while foreign companies were highly organized and represented by chambers of commerce or industry associations.

Foreign companies in China focus on influencing policy formulation and legislation at the central level, unlike Chinese entrepreneurs who primarily influence policy implementation at the local level. Foreign companies employ more Western-style lobbying methods, such as commissioning experts from renowned universities to conduct research and provide policy consultation reports to regulatory authorities like the State Administration for Market Regulation.

One notable example of successful lobbying by foreign pharmaceutical companies is the "foreign research drugs" policy. Even after the patent period for foreign drugs had expired, the companies lobbied the then Food and Drug Administration to provide patent price protection, allowing them to sell these drugs at higher prices than generic versions. This policy, which was recently abolished, demonstrates the impact of foreign companies' lobbying efforts in China.

While the background and methods of lobbying differ between foreign companies and Chinese private enterprises, the emergence of large Chinese corporations may lead to more similarities in their lobbying approaches in the future.

What's that Mean for Lobbying Within the System

This part was not originally from the podcast, but I’ve found it helpful in understanding nation-market relations. It comes from the book Lobbying Within the System, published in 2023 by Professor Huang. Only Chinese ver available for now.

In the book, she believes "Lobbying within the system" requires entrepreneurs to work within the existing mechanisms, channels, and spaces provided by the system to influence policies rather than external pressure. The relationship is more emphasized on cooperation than clash. The policy influence mechanism of Chinese private entrepreneurs is embedded in the framework of political absorption and integration within the system. This form of lobbying relies on the state's efforts to build policy influence mechanisms based on united front organizations, such as the CPPCC proposal handling process and coordination between ministries and the All-China Federation of Industry and Commerce (ACFIC). Under this mechanism, successful corporate policy proposals have two points: "wearing a hat" and "avoiding obstacles."

1. "Wearing a hat" means justifying the legitimacy and reasonableness of one's own policy demands under the guise of the central government's macro policy orientation or specific policies.

2. "Avoiding obstacles" means that policy demands should be as non-challenging as possible and feasible.

Unlike informal relationships and local growth alliances, "lobbying within the system" does not solely depend on the size of an entrepreneur's market power but rather on their alignment with the system's goals and their institutional status.